Virgin A350-1000 sale influenced by subsidies: WTO

By David Kaminski-Morrow2019-12-03T10:07:00+00:00

Virgin Atlantic’s order for 12 Airbus A350-1000s has played a central part in the World Trade Organization’s latest assessment as to whether subsidies influenced the competitive field against Boeing in the commercial aircraft market.

Virgin Atlantic’s order for 12 Airbus A350-1000s has played a central part in the World Trade Organization’s latest assessment as to whether subsidies influenced the competitive field against Boeing in the commercial aircraft market.

The UK carrier placed an order for eight A350-1000s in July 2016, with plans to lease a further four.

In its evidence to the WTO over the transatlantic subsidies dispute the US side claimed that the Virgin Atlantic order was one of several “significant lost sales” in the twin-aisle market – along with A350 deals from Emirates, Turkish Airlines, China Southern Airlines and others – which could be attributed to subsidies awarded to Airbus.

Source: Heathrow Airport

Virgin Atlantic took delivery of its first A350-1000 in August 2019

While it acknowledges the difficulty in determining which of these orders Boeing might have won, the WTO says – in a ruling on 2 December – that it took “specific note” of the Virgin Atlantic sales campaign.

Three aspects of the order, says the WTO, were “particularly instructive” to its assessment.

The WTO had previously concluded that Airbus, under a different subsidies scenario post-2013, could not have offered Virgin the A350 for delivery until at least 2022.

But Virgin secured earlier delivery slots, and received its first A350-1000 in August this year. Five aircraft were due for delivery in 2019.

“All 12 delivery positions to which Virgin Atlantic agreed would have been unavailable in the [alternative scenario],” states the WTO ruling. “We have difficulty believing that such a consideration would not have weighed on the decision of Virgin Atlantic in this sales campaign.”

Without the A350, it argues, Airbus would have been forced to compete against the Boeing 777 with the A330 – a type which is not intended as a competitor in the sector.

Virgin’s opting for the 777, adds the WTO, would have offered the carrier commonality advantages given its previous selection of the Boeing 787. Virgin has 17 787-9s in its fleet.

“These considerations, taken together, convince us that Airbus would not have won this Virgin Atlantic sale,” says the ruling.

It concludes that the direct effects of launch aid and member-state financing for the A350 programme amount to a cause of lost sales to the US twin-aisle aircraft industry.

In its ruling the WTO says the European Union has “failed to demonstrate” compliance with obligations to withdraw A350 subsidies from Germany and the UK, and that A350 subsidies continue to be a “genuine and substantial” cause of Airbus’s ability to offer and meet certain delivery positions for the twinjet.

Airbus has acknowledged the WTO findings that its efforts to align A350 loan agreements with market conditions have been inadequate, but states that it would “support to appeal” the report, and adds that it “remains committed” to complying with WTO recommendations.

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